US Treasurys Rally, Dollar Tumbles After Failed Healthcare Bill

Political uncertainty dominated US financial markets today as the Trump administration experienced another major setback in its effort to reform healthcare last night after two more Republican senators, Mike Lee (Utah) and Jerry Moran (Kansas), announced they would not be voting in favor of the latest Senate healthcare bill.  The lack of support from Lee and Moran brought the total number of the Senate Republicans declaring “no” votes to four, effectively ending any chance the GOP had of passing the “Better Care Reconciliation Act”.  With a passable replacement bill improbable in the foreseeable future, Senate Majority Leader Mitch McConnell pivoted the chamber’s target to a straight repeal of Obamacare, although the new plan has already received pushback from a number of Republican and Democratic senators alike.  Already addressing the possible outcome of an unsuccessful vote to repeal Obamacare, President Donald Trump reported his willingness to “let Obamacare fail” and wait for Democrats to “change their tune”.  The administration’s inability to deliver on one of its central campaign promises has cast further doubt on its odds for successful implementation of the remaining items on its pro-growth policy agenda, including sweeping tax cuts, passing substantive trade reform and increased infrastructure spending.

 

 

US financial markets immediately went into risk-off mode at the beginning of the trading session in response to the healthcare bill news.  Treasury yields/swap rates have declined 1-6 bps across the curve today in a bull flattening pattern, pushing the yield on the 10-year note down 5 bps to 2.26%.  The US dollar fell 0.5% against major currencies to an 11-month low, highlighted by a 0.7% drop vs. the euro.  US stock indices were mixed on the day, with the DJIA down 0.25%, while the tech-heavy Nasdaq rose 0.5% to a new record high, led by a 13.5% surge in Netflix’s share price.  In the commodities sector, gold gained 0.6% to $1,240/ounce and WTI crude oil added 1% to $46.50/barrel.